Insolvency Service consultation on new Restructuring Moratorium

The Insolvency Service has begun a consultation on a new moratorium restructuring moratorium. To participate in the the consultation access
Where the Directors are unable to agree with the creditors of their company to restructure the debt the only realistic restructuring option available is to place the company in adminstration and restructure it from their. However, what this means is that the Directors lose control of the company and place it into the hands of an insolvency practitioner. In essence, this the argument in favour of the proposal.
On the other hand the proposal gives rise to concerns around deterioration of security, control of the Directors handling the restructuring whose interests will be paramount and the effectiveness of the oversight in the process to ensure a fair balance.
There is no doubt that a properly implemented process would be welcome extra option for Directors but what has happened to the Company Voluntary Arrangement. In the end someone must look after the creditors interests and isn't that what a CVA seeks to achieve. Giving too much control to the Directors over balances the various interests of the stakeholders in the company heavily in favour of the Directors interests and the continuation of the company as a going concern at the expense of the creditors.

Business Insolvency rates at 3 year low!

Business Insolvency rates at 3 year low!

Experian reported yesterday that:
Insolvency rates among UK businesses are at their lowest number in three years, a new report has revealed.Experian's new Insolvency Index for August reveals that the rate of businesses going under dropped to 0.07 during the month, its lowest point since June 2007.Furthermore, the average financial strength rating across all sectors - which is given as a score out of 100 - increased from 80.79 in August 2009 to 81.06 in August 2010.

Smaller firms did very well in particular, with their score reaching 82.22 this year compared to 81.32 in August 2009.
Max Firth, managing principal of pH, an Experian company, said the results of the index reveal how quickly fortunes in business can change.

"This month's picture is very different to the one we saw back in March this year when all regions, bar one, saw an increase in insolvencies and the rate was almost double at 0.11 per cent," he commented.

The news comes despite a recent Bank of England report showing that lending to businesses, and smaller firms in particular, is still falling.


Business Insolvency rates at 3 year low!

Experian reported yesterday that:
Insolvency rates among UK businesses are at their lowest number in three years, a new report has revealed.Experian's new Insolvency Index for August reveals that the rate of businesses going under dropped to 0.07 during the month, its lowest point since June 2007.Furthermore, the average financial strength rating across all sectors - which is given as a score out of 100 - increased from 80.79 in August 2009 to 81.06 in August 2010.
Smaller firms did very well in particular, with their score reaching 82.22 this year compared to 81.32 in August 2009.
Max Firth, managing principal of pH, an Experian company, said the results of the index reveal how quickly fortunes in business can change.
"This month's picture is very different to the one we saw back in March this year when all regions, bar one, saw an increase in insolvencies and the rate was almost double at 0.11 per cent," he commented.
The news comes despite a recent Bank of England report showing that lending to businesses, and smaller firms in particular, is still falling.

It is now cheaper to defend your Intellectual Property rights?

By introducing a cap on costs for the losing party the Intellectual Property Users Committee has demonstrated the desire to ensure that more people wishing to defend their Intellectual Property rights use the Patent County Court to protect the IP rights that they have.
The cap (inclusive of disbursements and any success fee) will be £50,000 for a determining liability and £25,000 on determining damages or account of profit. In addition the process will include caps on costs for each stage of the process to outcome. these caps can be removed if one party has acted in a manner not consistent with trying to resolve the matter.
Additionally, the court can with the consent of the parties agree to a trial based on the papers only.
With the complexities it is important to remember that this does not apply to further appeals and this is an important factor that should temper one's view on the positive move that this represents.

US and UK Intellectual Property Office joint statement on co-operation

In March 2010 the United States Patent and Trademark Office (USPTO) and the United Kingdom Intellectual Property Office (IPO) announced plans to begin cooperation on increasing the efficiency and quality of the patent examination process by making greater use of each other’s work on commonly filed patent applications and eliminating duplication of work. This initiative will yield efficiencies in patent processing and thus shorten the innovation cycle. Work sharing is central to the efforts of both patent offices to fuel economic growth and create jobs - which are high priorities for both governments.
The offices have completed foundational work and preliminary studies and will begin work-sharing implementation in October. The initial phase of implementation will focus on maximizing re-use during examination of commonly filed applications by providing access to work completed and currently made available by each office. This will be combined with examiner training, data collection and analysis to gauge effectiveness and make necessary adjustments. At the same time the offices will work on such longer-term issues as easier access to each office’s application files to create a more robust work-sharing environment.
"By enabling both offices to maximize the use of each other’s search and examination results, this work-sharing initiative should reduce patent backlogs and help us process patents more efficiently," Under Secretary and Director of the USPTO David Kappos commented. "I believe that it will serve as a model for our efforts at work-sharing with other countries as a means to improve the global patent system and bring innovation to market sooner."
UK Intellectual Property Minister Baroness Wilcox said:
"I am delighted we are now ready to implement this work-sharing programme. It will bring real benefits to business in the UK and US by helping to create a more efficient and effective patent system."

Fall out from Sixty CVA continues

Following the decision in Mourant -v- Sixty the fall out from the judicial criticism continues. Among the tasks of the recently appointed liquidators is the process of investigating the actions of the previous joint administrators.
The issue of 'guarantee stripping' is a very real problem for Landlords where they have properly negotiated guarantees and suddenly find that the impact of the CVA on them is to damage or reduce the benefit of this guarantee.
This issue will continue to run but perhaps behind closed doors.

Archial Collapse shows signs of toughening stance by HMRC on "Time to Pay"

It was announced today that one of the UK's largest Architecture practices has placed itself into Adminstration following a rejection by HMRC of its plan to pay its tax liabilities on a monthly basis.
This blog has stated on a number of occasions in the past that HMRC would begin to toughen its stance to deal with the outstanding tax liabilities that have and will continue to build up. Whilst many saw this process as a quick fix for their cash flow problems in the past where they could not fix those inherent problems during the period of grace that they were given entering the scheme only pushed the inevitable business failure back.
It is sad to see the loss of such a large business with a good brand but this blog suggests that more is to come as HMRC get to grips with the problems that it has had built for it.

Strong decision making is key to effective board performance, says draft guidance

A well-designed decision-making process is one of the most important hallmarks of a strong board, according to draft guidance launched today for public consultation by the Institute of Chartered Secretaries and Administrators. When making decisions, boards should guard against the effects of a dominant personality, the existence of "no go" areas for non-executives and a poor line of sight to significant risk.
ICSA was asked to develop the guidance by the Financial Reporting Council to complement the new UK Corporate Governance Code which was issued in May. It will submit a final text later in the year for adoption by the FRC as a replacement to the existing Higgs Guidance.
The guidance is entitled "Improving Board Effectiveness". It has been drafted by a Steering Group chaired by Sir John Egan, recent chair of Severn Trent Plc, and takes account of an initial consultation involving both investors and chairs, directors, company secretaries and professional advisers operating in the boardrooms of UK plc.
That exercise revealed overwhelming support for short, non-prescriptive guidance to help improve board effectiveness. Key issues covered by the draft guidance are:
 More emphasis on the role of the chair as critical to building an effective board
 The importance of the board's role in creating a high-performance culture which maximises the opportunities for value creation and minimises risk
 The need to create an environment of challenge in the boardroom
 The value for companies of well-informed and high-quality board decision making
 Board composition and diversity as major factors in delivering an effective board
 The advantages of a good training and development programme designed to improve directors' skills, experience and knowledge
 The benefits of regular board evaluation to explore how well the board is functioning
Sir John Egan, chair of the Steering Group, said:
"Having received a wide range of responses during the initial stage of the consultation, we are now strongly encouraging all involved to submit comments that will help us complete the task of delivering guidance that will have a real impact on board effectiveness in the UK."
Baroness Hogg, FRC Chairman said:
"We are grateful to ICSA and the Steering Group for their work and look forward to the final text. The result should be guidance that will help boards apply the Governance Code in ways that deliver the most practical benefit."
This second stage of the consultation ends on 14 October 2010. ‘Improving board effectiveness’ is available here. It is intended that the completed draft guidance will be submitted to the FRC in November. The FRC intends to publish the final guidance by the end of 2010.

OFT and Competition Commission issue new advice on Mergers

On 16 September 2010 the OFT and the Competition Commission issued a joint statement on their approach to Mergers and when the OFT will refer a matter to the CC

" The publication explains the approach of the OFT when considering whether or not to refer a merger to the CC for further investigation and the approach of the CC when exploring more extensively the statutory questions posed in merger references. It highlights the differences of emphasis, as well as the commonalities, between the approaches of the OFT and the CC (‘the Authorities’). The new guidelines comprise seven parts:

• Part 1 provides some explanatory notes and outlines the UK merger regime.

• Part 2 sets out the overarching questions the OFT and the CC must consider
in conducting reviews of mergers.

• Part 3 explains what is meant by a ‘relevant merger situation’.

• Part 4 explains the Authorities’ approach to the concept of a ‘substantial lessening of competition’ (SLC) and outlines the notions of ‘theories of harm’ and the ‘counterfactual’.

• Part 5 describes the analytical approach and methodologies applied by the Authorities in considering the SLC test.

• Part 6 provides guidance on public interest cases.

• Part 7 lists additional guidance relevant to the UK merger control regime.


UK and Foreign IPs competing for UK assets. Reality or illusion?

As a result of a recent Court of Appeal judgment in the case of Rubin and another v Eurofinance SA the ruling allows foreign IPs to pursue directors and assets in the UK jurisdiction arising as a result of foreign jurisdiction insolvency proceedings. Does this mean that UK practitioners will constantly be in conflict with practitioners from other jurisdictions in more complex matters?

UK based received David Rubin and Partners (DRP) applied for an order in the New York courts to pursue Eurofinance in the UK. The basis is that Eurofinance, a British Virgin Islands company, with customers in the US had assets in the UK and some of the Directors were located here. The New York court granted an order to pursue the Directors and Assets following which the DRP applied to enforce the order through the UK courts. Using the 2006 rules of the UN Commission on International Trade Law (UNCITRAL) model law on Cross-Border Insolvency as set out in Schedule 1 to the Cross-Border Insolvency Regulations 2006 the court considered whether the procedure under the Regulations and the Model Law could be used to enforce the judgment in the adversary proceedings in England and in particular:

1.whether the conditions for recognition in article 17 of Schedule 1 to the Model Law had been fulfilled; and

2.the nature of the assistance which the court could and should give.

The court ruled, inter alia, that foreign bankruptcy proceedings should be recognised as a foreign main proceeding in accordance with the Model Law and that the appointment of the receivers as foreign representatives within the meaning of article 2(j) of the Model Law should similarly be recognised.

It is important to remember that the ordinary rules for enforcing or more precisely not enforcing, foreign judgments did not apply to bankruptcy proceedings. However, as the defendants weren’t affected by the ordinary rules regarding private international law the Model Law provided a unique situation in which enforcement could occur in the UK. As a result it is apparent that foreign insolvency practitioners can pursue directors in the UK jurisdiction.

There is some argument in the legal press presently about the similarity of application in foreign jurisdictions and whether this rule applies mutatis mutandis. But what does this mean for the priorities of enforcement between competing UK IPs and those from foreign jurisdictions? Whilst this case does not relate to competing interests the door is now open and the likelihood of the situation arising is ever nearer.

One only has to look at the Allen Stanford and related insolvency issues in the US to see that competing interests can cost the creditors of UK companies, significant amounts of money simply to rationalise the priorities.

I would welcome your views.